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Sat 2 Feb 2008 04:00 AM

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Money talks

Technology advances means mobile banking may be the Middle East's next big thing.

Bank customers are finding ever more reasons to avoid visiting high street branches, and one of them is mobile banking, a technology that has been hotly tipped in more mature markets and now looks set to make an impression in the Middle East.

In recent weeks they have been raising the rates for remittances through the exchange houses, and so through your mobile phone it’s relatively much cheaper than what it would cost you through an exchange house.

Research released in November 2007 by financial technology consultancy TowerGroup reported that mobile banking will become an integral part of US banks' service offerings in the coming years.

"Banking over the mobile channel, especially when considered in the context of an evolution toward mobile payments, is now fast becoming a market mandate - and is no less important than the dawn of internet banking in the late 1990s," the report stated.

TowerGroup finds that mobile banking appeals to consumers' preference for real time, self-service transactions and is also popular with banking customers who are not comfortable using internet services.

The report predicts that 30% of users of online banking will take up mobile banking services within the next five years.

At the end of 2007, there were more than one million mobile banking users in the US, the report estimates, and that number is expected to reach 40 million by 2012.

The report focuses on the US banking industry, but it is reasonable to assume that the Middle East, with its tendency to leapfrog to the most modern forms of technology, will see mobile banking implementations become as commonplace as internet banking portals.

The people implementing these systems will also want to avoid the mistakes and setbacks that mobile banking encountered in its infancy.

"Mobile banking initiatives launched in the early part of this decade crashed and burned - victims of a lack of compelling features, functionality and consumer friendliness," says the TowerGroup report.

"Compounding these issues were limited device support, poor network availability and slow data speeds, as well as a lack of focus from mobile operators."

In the Middle East, mobile penetration levels are high - above 100% in the UAE, where many people own more than one mobile phone - so it is no surprise that regional banks are considering introducing technology to bring banking services closer to the customer.

National Bank of Abu Dhabi (NBAD) is one of the first institutions to begin a mobile banking programme, having developed SMS services for its UAE customers.

"We basically saw the need for it in this market," says Ahmed Al-Naqbi, manager, electronic banking services, retail banking group, NBAD.

"The UAE has one of the highest rates of mobile penetration - we're talking about 170% mobile penetration - and we saw a very good business case to implement it as one of our products and services."

In October 2006, NBAD launched its SMS Money Transfer service, allowing customers of the bank to transfer money to anyone who has a mobile phone.

Customers call a toll-free number and an automated voice recognition system asks them to enter the mobile number of the beneficiary.

The beneficiary then receives an SMS with a PIN that can be entered at any NBAD cash machine to withdraw the specified amount of cash without an ATM card.

Previously, the bank launched a service for customers who had lost their ATM cards. Using the same technology, customers can use a PIN to withdraw cash of up to AED500 from any ATM, without a card.

One of the services that may be particularly well suited to run on mobile phones is international remittances.

"We have a lot of expatriates working here in the UAE and one of the major services that we want to provide is international remittances through mobile phone," says Al-Naqbi.

"In recent weeks they have been raising the rates for remittances through the exchange houses, and so through your mobile phone it's relatively much cheaper than what it would cost you through an exchange house."
NBAD's mobile services use software from LUUP, a European solution provider, and run on any mobile phone with internet capabilities.

Al-Naqbi says that the bank could not find a suitable solution from a local developer, and chose LUUP for the ability to customise the software to meet the needs of the UAE market.

This should enable it to target an entirely new customer base.

"One of the largest segments of the market we're targeting is the non-bank customer," says Al-Naqbi.

"There are a lot of people, who if their salaries are AED 3,000 or 4,000 a month, can't necessarily open a bank account with NBAD or other banks, just for liability purposes."

"Through LUUP you can technically bank with us through your mobile phone through the use of a pre-paid card, so it's kind of a virtual account," he adds.

The LUUP solution allows users to store money on their phone, turning it into what Al-Naqbi calls an e-wallet.

The money is tied to a virtual account and users can transfer money to other people or pay bills simply by sending an SMS, receiving a confirmation text that acts as a receipt.

The next step is full mobile banking, allowing users to use their mobile phones for all of the kinds of transactions that they would be able to conduct online.

Existing customers of NBAD will be able to carry out transactions either online or through their m payment at a merchant's POS (point of sale) terminal.

For non-banked customers, the LUUP account is tied to a pre-paid card printed with the account number. "You would deposit money onto the pre-paid card and withdraw money off the pre-paid card," says Al-Naqbi.

"You could deposit money at any of the cash machines or branches, and you can basically withdraw money with the pre-paid card everywhere because it has a Visa Electron logo on it.

You can use it at any of the ATM, you can even do purchases with the pre-paid card. So any money that's sent to that pre-paid card via LUUP, can be used for buying items at POS terminals or withdrawing cash."

In addition to being more convenient for customers, the systems also have benefits for NBAD.

Al-Naqbi says that the mobile banking system provides a new, untapped income stream by enabling unbanked consumers to use the service, is reliable and secure, and can drive down the cost of transactions for the bank.

"It's very low when it comes to operational costs and overheads," he says.

"There are certain costs attributed every time a customer walks up to a branch or an ATM whereas with mobile phones you don't have to pay for a teller to be sitting there, you don't have to pay rent, you don't have to pay for the furniture - all those little things."

"In turn, it allows us to pass on those savings to our customers, so our customers won't have to pay probably half as much as they would for services at branches or ATMs."

The implementation of LUUP began in May 2007 and it is in the process of launching.

The service will be available only in English at first, but later stages of the programme will see it support the Arabic language.

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